Southern Oil Refining is the NSW-based company behind the plant which has the potential to expand to a $150 million commercial-scale refinery with the capacity to produce 200 million litres of fuel per year.

"The announcement of $16 million for the diesel-from-fibre plant at Gladstone is very big news for North Queensland," said Mr Katter.

"I think most of us are scared that public money is going into new technologies but very big commercial money has also gone into this, indicating that large commercial players take this project seriously."

Mr Katter also pointed out the incongruity of the Australian Government's current methodology to fuel procurement.

"This plant proves the total incompetence of the ALP and LNP Federal Governments that we're sending $23 billion a year to the Middle East to buy petrol. That $23 billion should be going into rural Australia and specifically regional North Queensland to develop this kind of industry."